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Question 1 of 10
1. Question
2 points
Consider the following statements regarding Paleolithic sites.
1. These sites were generally located near water sources.
2. Some of the famous sites of Paleolithic age are Soan valley and Potwar Plateau on the northwest India.
3. Horticulture was started during this period.
Which of the above statements is/are correct?
Correct
Paleolithic or Old Stone Age sites are generally located near water sources.
Some of the famous sites of Old Stone Age in India are:
8. The Soan valley and Potwar Plateau on the northwest India.
9. The Siwalik hills on the north India.
10. Bhimpetka in Madhya Pradesh.
11. Adamgarh hill in Narmada valley.
12. Kurnool in Andhra Pradesh and
13. Attirampakkam near Chennai.
Domestication of animals, horticulture and primitive cultivation started during Mesolithic or Middle Stone Age.
Incorrect
Paleolithic or Old Stone Age sites are generally located near water sources.
Some of the famous sites of Old Stone Age in India are:
8. The Soan valley and Potwar Plateau on the northwest India.
9. The Siwalik hills on the north India.
10. Bhimpetka in Madhya Pradesh.
11. Adamgarh hill in Narmada valley.
12. Kurnool in Andhra Pradesh and
13. Attirampakkam near Chennai.
Domestication of animals, horticulture and primitive cultivation started during Mesolithic or Middle Stone Age.
Question 2 of 10
2. Question
2 points
Aryavarta, Madhyadesa and Dakshinapatha refer to
Correct
The later Vedic texts refer to the three divisions of India – Aryavarta (northern India), Madhyadesa (central India) and Dakshinapatha (southern India).
Incorrect
The later Vedic texts refer to the three divisions of India – Aryavarta (northern India), Madhyadesa (central India) and Dakshinapatha (southern India).
Question 3 of 10
3. Question
2 points
The consequences of the Great Depression (1929) for India included
1. Mass production of defence goods in India
2. Collapse of prices of many food grains
3. India became a net importer of precious metals like gold.
Select the correct answer using the codes below.
Correct
First World War (FWW) led to mass production in the US and lowered goods prices. With rising wages in US, consumption rocketed as people could afford more goods. Demand for consumer goods was fuelled by a boom in housing construction and real estate business. This created the base for prosperity in the US leading to greater investments and incomes.US started exporting capital to the World and became the largest overseas lender.
• But since 1929 the world along with US economy slumped into a deep recession.
Incorrect
First World War (FWW) led to mass production in the US and lowered goods prices. With rising wages in US, consumption rocketed as people could afford more goods. Demand for consumer goods was fuelled by a boom in housing construction and real estate business. This created the base for prosperity in the US leading to greater investments and incomes.US started exporting capital to the World and became the largest overseas lender.
• But since 1929 the world along with US economy slumped into a deep recession.
Question 4 of 10
4. Question
2 points
Which of these sectors was chosen as the ‘prime moving force’ (PMF) of the Indian economy post- independence in the initial days of planning and development?
Correct
• . Industry, infrastructure, science and technology and higher education, to name a few, received greater emphasis in the early years after independence. This is because all these areas of development required heavy capital investment as they had been severely avoided by the colonial rulers for over 150 years or so.
• Increasing the growth of the economy and that too with a faster pace was the urgent need of the economy. Looking at the pros and cons of the available options, India decided the industrial sector to be the ‘prime moving force’ (PMF) of the economy—the logical choice for a faster growth (a fully established idea at that time, all over the world).
Incorrect
• . Industry, infrastructure, science and technology and higher education, to name a few, received greater emphasis in the early years after independence. This is because all these areas of development required heavy capital investment as they had been severely avoided by the colonial rulers for over 150 years or so.
• Increasing the growth of the economy and that too with a faster pace was the urgent need of the economy. Looking at the pros and cons of the available options, India decided the industrial sector to be the ‘prime moving force’ (PMF) of the economy—the logical choice for a faster growth (a fully established idea at that time, all over the world).
Question 5 of 10
5. Question
2 points
The New Economic Policy (NEP) 1991 was an outcome of
Correct
• . A BoP crisis is a situation when the foreign exchange that a nation has is not enough to finance the external account deficit. Foreign exchange reserves in the late 1980s declined to a level that was not adequate to finance imports for more than two weeks. There was also not sufficient foreign exchange to pay the interest that needs to be paid to international lenders. Therefore, a BoP crisis was looming to avert which India resorted to the help of WB and IMF. So, (d) is correct.
• Hyperinflation is a situation of exceedingly high inflation (likes of 300-5000%). India was not suffering with hyperinflation, however, inflation was high. Asian financial crisis happened in 1997 from which India was largely insulated. Other objectives of the policy were to tackle high inflation, mismanagement of the economy, revive growth prospects etc. However, the most appropriate reason is to avert a BoP crisis.
• The NEP aimed towards creating a more competitive environment in the economy and removing the barriers to entry and growth of firms. It can broadly be classified into two groups: the stabilization measures and the structural reform measures. Stabilization measures are short-term measures, intended to correct some of the weaknesses that have developed in the balance of payments and to bring inflation under control. On the other hand, structural reform policies are long-term measures, aimed at improving the efficiency of the economy and increasing its international competitiveness by removing the rigidities in various segments of the Indian economy.
Incorrect
• . A BoP crisis is a situation when the foreign exchange that a nation has is not enough to finance the external account deficit. Foreign exchange reserves in the late 1980s declined to a level that was not adequate to finance imports for more than two weeks. There was also not sufficient foreign exchange to pay the interest that needs to be paid to international lenders. Therefore, a BoP crisis was looming to avert which India resorted to the help of WB and IMF. So, (d) is correct.
• Hyperinflation is a situation of exceedingly high inflation (likes of 300-5000%). India was not suffering with hyperinflation, however, inflation was high. Asian financial crisis happened in 1997 from which India was largely insulated. Other objectives of the policy were to tackle high inflation, mismanagement of the economy, revive growth prospects etc. However, the most appropriate reason is to avert a BoP crisis.
• The NEP aimed towards creating a more competitive environment in the economy and removing the barriers to entry and growth of firms. It can broadly be classified into two groups: the stabilization measures and the structural reform measures. Stabilization measures are short-term measures, intended to correct some of the weaknesses that have developed in the balance of payments and to bring inflation under control. On the other hand, structural reform policies are long-term measures, aimed at improving the efficiency of the economy and increasing its international competitiveness by removing the rigidities in various segments of the Indian economy.
Question 6 of 10
6. Question
2 points
Consider the following statements.
Assertion (A): Before 1991, majority of female workers, in India, were from rural areas, but post-1991 their majority is found in urban areas.
Reason (R): Industrial and services sector have grown faster than agriculture after 1991 post the introduction of New Economic Policy.
In the context of the above, which of these is correct?
Correct
• Of the total 402 million workers, 275 million are males and 127 million females. This would mean that 51.7 percent of the total males and 25.6 percent of the total females are workers. Majority of female workers (87.3 percent) are from rural areas. This is also twice that of male workers, which may be due to their being employed predominantly in activities like cultivation and agricultural labour. The trend has not changed much even after 1991.
• So, A is wrong. In the urban areas, majority of female workers are engaged in Households industry and other work.
• Interestingly, among marginal workers females outnumber the males. In three of the four categories, viz. cultivators, agricultural labourers and household industries, female marginal workers outnumber male workers.
Incorrect
• Of the total 402 million workers, 275 million are males and 127 million females. This would mean that 51.7 percent of the total males and 25.6 percent of the total females are workers. Majority of female workers (87.3 percent) are from rural areas. This is also twice that of male workers, which may be due to their being employed predominantly in activities like cultivation and agricultural labour. The trend has not changed much even after 1991.
• So, A is wrong. In the urban areas, majority of female workers are engaged in Households industry and other work.
• Interestingly, among marginal workers females outnumber the males. In three of the four categories, viz. cultivators, agricultural labourers and household industries, female marginal workers outnumber male workers.
Question 7 of 10
7. Question
2 points
Which of these were significant elements of the New Industrial Policy, 1991?
1. De-reservation and de-licensing of certain industries
2. Revival of the MRTP Limit (Monopolistic and Restrictive Trade Practices)
3. Promotion to Foreign Investment
4. Commitment to a Foreign Exchange Management Act allowing improved current account convertibility
Select the correct answer using the codes below.
Correct
• Statement 1: This policy abolished the Industrial licensing for all industries except for a short list of 18 industries. This list of 18 industries was further pruned in 1999 whereby the number reduced to six industries viz. drugs and pharmaceuticals, hazardous chemicals, explosives such as gun powder and detonating fuses, tobacco products, alcoholic drinks, and electronic, aerospace and defence equipment.
• Statement 2: The limit was abolished and companies were allowed to expand freely with only certain limitations.
• Statement 3: This was the first Industrial policy in which foreign companies were allowed to have majority stake in India. In 47 high priority industries, up to 51% FDI was allowed. For export trading houses, FDI up to 74% was allowed. Today, there are numerous sectors in the economy where government allows 100% FDI.
• Statement 4: Restrictions on exchange of currency for the purposes of current account (such as trade or remittances) were revoked.
Incorrect
Question 8 of 10
8. Question
2 points
Agriculture was chosen as the Prime Moving force of the economy since 2002 on the advice of the Planning Commission. As a major policy shift, it was aimed at solving which of the following issues affecting the Indian Economy?
1. Boosting aggregate demand in the economy
2. Ending the production monopoly of the PSUs in the agricultural sector
3. Increasing rural employment
Select the correct answer using the codes below.
Correct
• . Statement 1: Agriculture is a key feed to other industries, for e.g. food processing sector. An increase in agricultural growth directly translates to a growth in other sectors of the economy.
• Statement 2: The movement was intended not to cut down competition in any particular sector of the economy rather to facilitate growth in all the sectors.
• Statement 3: Investment in agriculture also involves creation of capital goods such as warehousing, irrigation infrastructure which both directly and indirectly generates employment.
• The other major challenges to be solved were:
• Food Security, which in a sense means ensuring adequate infrastructure in rural areas in agriculture. It is because food security is not just about productivity; it is also about accessibility of food.
• Market Failure: It also had to solve the case of India being a market failure. It means that goods and services are available in the economy, but there is little demand.
• This is because majority of population lives on agriculture which does not provide them with good purchasing power. With this policy shift their incomes were supposed to be improved and market demand be boosted. This would also involve generating more rural employment.
Incorrect
• . Statement 1: Agriculture is a key feed to other industries, for e.g. food processing sector. An increase in agricultural growth directly translates to a growth in other sectors of the economy.
• Statement 2: The movement was intended not to cut down competition in any particular sector of the economy rather to facilitate growth in all the sectors.
• Statement 3: Investment in agriculture also involves creation of capital goods such as warehousing, irrigation infrastructure which both directly and indirectly generates employment.
• The other major challenges to be solved were:
• Food Security, which in a sense means ensuring adequate infrastructure in rural areas in agriculture. It is because food security is not just about productivity; it is also about accessibility of food.
• Market Failure: It also had to solve the case of India being a market failure. It means that goods and services are available in the economy, but there is little demand.
• This is because majority of population lives on agriculture which does not provide them with good purchasing power. With this policy shift their incomes were supposed to be improved and market demand be boosted. This would also involve generating more rural employment.
Question 9 of 10
9. Question
2 points
Which of the following are benefits/potential benefits of Goods and Service Tax (GST)?
1. It will result into higher economic growth as GDP is expected to rise by about 2%.
2. It has expanded the tax base and introduced higher transparency in the taxation system.
3. It has facilitated the freedom of movement of goods and services and created a common
market in the country.
Which of the statements given above are correct?
Correct
• Goods and Service Tax (GST) is the single comprehensive indirect tax, operational from 1 July
• 2017, on supply of goods and services, right from the manufacturer/ service provider to the
• consumer. It is a destination-based consumption tax with facility of Input Tax Credit in the
• supply chain. It is applicable throughout the country with one rate for one type of
• goods/service. It has amalgamated a large number of Central and State taxes and cesses. It
• has replaced large number of taxes on goods and services levied on production/sale of goods
• or provision of service.
• GST has simplified the multiplicity of taxes on goods and services.
• The laws, procedures and rates of taxes across the country are standardized. It
• has facilitated the freedom of movement of goods and services and created a
• common market in the country.
• It is aimed at reducing the cost of business operations and cascading effect of
• various taxes on consumers. It has also reduced the overall cost of production,
• which will make Indian products/services more competitive in the domestic and
• international markets.
• It will also result into higher economic growth as GDP is expected to rise by
• about 2%.
• Compliance will also be easier as all tax payment related services like
• registration, returns, payments are available online through a common portal
• http://www.gst.gov.in.
• It has expanded the tax base, introduced higher transparency in the taxation
• system, reduced human interface between Taxpayer and Government and is
• furthering ease of doing business.
• All the above statements are correct.
Incorrect
• Goods and Service Tax (GST) is the single comprehensive indirect tax, operational from 1 July
• 2017, on supply of goods and services, right from the manufacturer/ service provider to the
• consumer. It is a destination-based consumption tax with facility of Input Tax Credit in the
• supply chain. It is applicable throughout the country with one rate for one type of
• goods/service. It has amalgamated a large number of Central and State taxes and cesses. It
• has replaced large number of taxes on goods and services levied on production/sale of goods
• or provision of service.
• GST has simplified the multiplicity of taxes on goods and services.
• The laws, procedures and rates of taxes across the country are standardized. It
• has facilitated the freedom of movement of goods and services and created a
• common market in the country.
• It is aimed at reducing the cost of business operations and cascading effect of
• various taxes on consumers. It has also reduced the overall cost of production,
• which will make Indian products/services more competitive in the domestic and
• international markets.
• It will also result into higher economic growth as GDP is expected to rise by
• about 2%.
• Compliance will also be easier as all tax payment related services like
• registration, returns, payments are available online through a common portal
• http://www.gst.gov.in.
• It has expanded the tax base, introduced higher transparency in the taxation
• system, reduced human interface between Taxpayer and Government and is
• furthering ease of doing business.
• All the above statements are correct.
Question 10 of 10
10. Question
2 points
Consider the following statements regarding Gross Domestic product (GDP)
1. If the GDP of the country is rising, the welfare will rise as a consequence.
2. Many activities in an economy are not evaluated in monetary terms and hence, they are not
included in calculating GDP.
Which of the statements given above is/are correct?
Correct
• GDP is the sum total of value of goods and services created within the geographical boundary
• of a country in a particular year. It gets distributed among the people as incomes (except for
• retained earnings). So we may be tempted to treat higher level of GDP of a country as an index
• of greater well-being of the people of that country (to account for price changes, we may take
• the value of real GDP instead of nominal GDP).
But there are at least three reasons why this may not be correct.
1. Distribution of GDP – how uniform is it: If the GDP of the country is rising, the welfare may not rise as a consequence. Hence, statement 1 is incorrect. This is because the rise in GDP may be concentrated in the hands of very few individuals or firms. For the rest, the income may in fact have fallen. In such a case the welfare of the entire country cannot be said to have increased.
2. Non-monetary exchanges: Many activities in an economy are not evaluated in monetary terms. For example, the domestic services women perform at home are not paid for. The exchanges which take place in the informal sector without the help of money are called barter exchanges. In barter exchanges, goods (or services) are directly exchanged against each other. But since money is not being used here, these exchanges are not registered as part of economic activity.
3. Externalities: Externalities refer to the benefits (or harms) a firm or an individual causes to another for which they are not paid (or penalised). Externalities do not have any market in which they can be bought and sold.
Incorrect
• GDP is the sum total of value of goods and services created within the geographical boundary
• of a country in a particular year. It gets distributed among the people as incomes (except for
• retained earnings). So we may be tempted to treat higher level of GDP of a country as an index
• of greater well-being of the people of that country (to account for price changes, we may take
• the value of real GDP instead of nominal GDP).
But there are at least three reasons why this may not be correct.
1. Distribution of GDP – how uniform is it: If the GDP of the country is rising, the welfare may not rise as a consequence. Hence, statement 1 is incorrect. This is because the rise in GDP may be concentrated in the hands of very few individuals or firms. For the rest, the income may in fact have fallen. In such a case the welfare of the entire country cannot be said to have increased.
2. Non-monetary exchanges: Many activities in an economy are not evaluated in monetary terms. For example, the domestic services women perform at home are not paid for. The exchanges which take place in the informal sector without the help of money are called barter exchanges. In barter exchanges, goods (or services) are directly exchanged against each other. But since money is not being used here, these exchanges are not registered as part of economic activity.
3. Externalities: Externalities refer to the benefits (or harms) a firm or an individual causes to another for which they are not paid (or penalised). Externalities do not have any market in which they can be bought and sold.
13 March 2022
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13 March 2022 Static Quiz for UPSC Prelims
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Question 1 of 10
1. Question
2 points
Consider the following statements regarding Paleolithic sites.
1. These sites were generally located near water sources.
2. Some of the famous sites of Paleolithic age are Soan valley and Potwar Plateau on the northwest India.
3. Horticulture was started during this period.
Which of the above statements is/are correct?
Correct
Paleolithic or Old Stone Age sites are generally located near water sources.
Some of the famous sites of Old Stone Age in India are:
8. The Soan valley and Potwar Plateau on the northwest India.
9. The Siwalik hills on the north India.
10. Bhimpetka in Madhya Pradesh.
11. Adamgarh hill in Narmada valley.
12. Kurnool in Andhra Pradesh and
13. Attirampakkam near Chennai.
Domestication of animals, horticulture and primitive cultivation started during Mesolithic or Middle Stone Age.
Incorrect
Paleolithic or Old Stone Age sites are generally located near water sources.
Some of the famous sites of Old Stone Age in India are:
8. The Soan valley and Potwar Plateau on the northwest India.
9. The Siwalik hills on the north India.
10. Bhimpetka in Madhya Pradesh.
11. Adamgarh hill in Narmada valley.
12. Kurnool in Andhra Pradesh and
13. Attirampakkam near Chennai.
Domestication of animals, horticulture and primitive cultivation started during Mesolithic or Middle Stone Age.
Question 2 of 10
2. Question
2 points
Aryavarta, Madhyadesa and Dakshinapatha refer to
Correct
The later Vedic texts refer to the three divisions of India – Aryavarta (northern India), Madhyadesa (central India) and Dakshinapatha (southern India).
Incorrect
The later Vedic texts refer to the three divisions of India – Aryavarta (northern India), Madhyadesa (central India) and Dakshinapatha (southern India).
Question 3 of 10
3. Question
2 points
The consequences of the Great Depression (1929) for India included
1. Mass production of defence goods in India
2. Collapse of prices of many food grains
3. India became a net importer of precious metals like gold.
Select the correct answer using the codes below.
Correct
First World War (FWW) led to mass production in the US and lowered goods prices. With rising wages in US, consumption rocketed as people could afford more goods. Demand for consumer goods was fuelled by a boom in housing construction and real estate business. This created the base for prosperity in the US leading to greater investments and incomes.US started exporting capital to the World and became the largest overseas lender.
• But since 1929 the world along with US economy slumped into a deep recession.
Incorrect
First World War (FWW) led to mass production in the US and lowered goods prices. With rising wages in US, consumption rocketed as people could afford more goods. Demand for consumer goods was fuelled by a boom in housing construction and real estate business. This created the base for prosperity in the US leading to greater investments and incomes.US started exporting capital to the World and became the largest overseas lender.
• But since 1929 the world along with US economy slumped into a deep recession.
Question 4 of 10
4. Question
2 points
Which of these sectors was chosen as the ‘prime moving force’ (PMF) of the Indian economy post- independence in the initial days of planning and development?
Correct
• . Industry, infrastructure, science and technology and higher education, to name a few, received greater emphasis in the early years after independence. This is because all these areas of development required heavy capital investment as they had been severely avoided by the colonial rulers for over 150 years or so.
• Increasing the growth of the economy and that too with a faster pace was the urgent need of the economy. Looking at the pros and cons of the available options, India decided the industrial sector to be the ‘prime moving force’ (PMF) of the economy—the logical choice for a faster growth (a fully established idea at that time, all over the world).
Incorrect
• . Industry, infrastructure, science and technology and higher education, to name a few, received greater emphasis in the early years after independence. This is because all these areas of development required heavy capital investment as they had been severely avoided by the colonial rulers for over 150 years or so.
• Increasing the growth of the economy and that too with a faster pace was the urgent need of the economy. Looking at the pros and cons of the available options, India decided the industrial sector to be the ‘prime moving force’ (PMF) of the economy—the logical choice for a faster growth (a fully established idea at that time, all over the world).
Question 5 of 10
5. Question
2 points
The New Economic Policy (NEP) 1991 was an outcome of
Correct
• . A BoP crisis is a situation when the foreign exchange that a nation has is not enough to finance the external account deficit. Foreign exchange reserves in the late 1980s declined to a level that was not adequate to finance imports for more than two weeks. There was also not sufficient foreign exchange to pay the interest that needs to be paid to international lenders. Therefore, a BoP crisis was looming to avert which India resorted to the help of WB and IMF. So, (d) is correct.
• Hyperinflation is a situation of exceedingly high inflation (likes of 300-5000%). India was not suffering with hyperinflation, however, inflation was high. Asian financial crisis happened in 1997 from which India was largely insulated. Other objectives of the policy were to tackle high inflation, mismanagement of the economy, revive growth prospects etc. However, the most appropriate reason is to avert a BoP crisis.
• The NEP aimed towards creating a more competitive environment in the economy and removing the barriers to entry and growth of firms. It can broadly be classified into two groups: the stabilization measures and the structural reform measures. Stabilization measures are short-term measures, intended to correct some of the weaknesses that have developed in the balance of payments and to bring inflation under control. On the other hand, structural reform policies are long-term measures, aimed at improving the efficiency of the economy and increasing its international competitiveness by removing the rigidities in various segments of the Indian economy.
Incorrect
• . A BoP crisis is a situation when the foreign exchange that a nation has is not enough to finance the external account deficit. Foreign exchange reserves in the late 1980s declined to a level that was not adequate to finance imports for more than two weeks. There was also not sufficient foreign exchange to pay the interest that needs to be paid to international lenders. Therefore, a BoP crisis was looming to avert which India resorted to the help of WB and IMF. So, (d) is correct.
• Hyperinflation is a situation of exceedingly high inflation (likes of 300-5000%). India was not suffering with hyperinflation, however, inflation was high. Asian financial crisis happened in 1997 from which India was largely insulated. Other objectives of the policy were to tackle high inflation, mismanagement of the economy, revive growth prospects etc. However, the most appropriate reason is to avert a BoP crisis.
• The NEP aimed towards creating a more competitive environment in the economy and removing the barriers to entry and growth of firms. It can broadly be classified into two groups: the stabilization measures and the structural reform measures. Stabilization measures are short-term measures, intended to correct some of the weaknesses that have developed in the balance of payments and to bring inflation under control. On the other hand, structural reform policies are long-term measures, aimed at improving the efficiency of the economy and increasing its international competitiveness by removing the rigidities in various segments of the Indian economy.
Question 6 of 10
6. Question
2 points
Consider the following statements.
Assertion (A): Before 1991, majority of female workers, in India, were from rural areas, but post-1991 their majority is found in urban areas.
Reason (R): Industrial and services sector have grown faster than agriculture after 1991 post the introduction of New Economic Policy.
In the context of the above, which of these is correct?
Correct
• Of the total 402 million workers, 275 million are males and 127 million females. This would mean that 51.7 percent of the total males and 25.6 percent of the total females are workers. Majority of female workers (87.3 percent) are from rural areas. This is also twice that of male workers, which may be due to their being employed predominantly in activities like cultivation and agricultural labour. The trend has not changed much even after 1991.
• So, A is wrong. In the urban areas, majority of female workers are engaged in Households industry and other work.
• Interestingly, among marginal workers females outnumber the males. In three of the four categories, viz. cultivators, agricultural labourers and household industries, female marginal workers outnumber male workers.
Incorrect
• Of the total 402 million workers, 275 million are males and 127 million females. This would mean that 51.7 percent of the total males and 25.6 percent of the total females are workers. Majority of female workers (87.3 percent) are from rural areas. This is also twice that of male workers, which may be due to their being employed predominantly in activities like cultivation and agricultural labour. The trend has not changed much even after 1991.
• So, A is wrong. In the urban areas, majority of female workers are engaged in Households industry and other work.
• Interestingly, among marginal workers females outnumber the males. In three of the four categories, viz. cultivators, agricultural labourers and household industries, female marginal workers outnumber male workers.
Question 7 of 10
7. Question
2 points
Which of these were significant elements of the New Industrial Policy, 1991?
1. De-reservation and de-licensing of certain industries
2. Revival of the MRTP Limit (Monopolistic and Restrictive Trade Practices)
3. Promotion to Foreign Investment
4. Commitment to a Foreign Exchange Management Act allowing improved current account convertibility
Select the correct answer using the codes below.
Correct
• Statement 1: This policy abolished the Industrial licensing for all industries except for a short list of 18 industries. This list of 18 industries was further pruned in 1999 whereby the number reduced to six industries viz. drugs and pharmaceuticals, hazardous chemicals, explosives such as gun powder and detonating fuses, tobacco products, alcoholic drinks, and electronic, aerospace and defence equipment.
• Statement 2: The limit was abolished and companies were allowed to expand freely with only certain limitations.
• Statement 3: This was the first Industrial policy in which foreign companies were allowed to have majority stake in India. In 47 high priority industries, up to 51% FDI was allowed. For export trading houses, FDI up to 74% was allowed. Today, there are numerous sectors in the economy where government allows 100% FDI.
• Statement 4: Restrictions on exchange of currency for the purposes of current account (such as trade or remittances) were revoked.
Incorrect
Question 8 of 10
8. Question
2 points
Agriculture was chosen as the Prime Moving force of the economy since 2002 on the advice of the Planning Commission. As a major policy shift, it was aimed at solving which of the following issues affecting the Indian Economy?
1. Boosting aggregate demand in the economy
2. Ending the production monopoly of the PSUs in the agricultural sector
3. Increasing rural employment
Select the correct answer using the codes below.
Correct
• . Statement 1: Agriculture is a key feed to other industries, for e.g. food processing sector. An increase in agricultural growth directly translates to a growth in other sectors of the economy.
• Statement 2: The movement was intended not to cut down competition in any particular sector of the economy rather to facilitate growth in all the sectors.
• Statement 3: Investment in agriculture also involves creation of capital goods such as warehousing, irrigation infrastructure which both directly and indirectly generates employment.
• The other major challenges to be solved were:
• Food Security, which in a sense means ensuring adequate infrastructure in rural areas in agriculture. It is because food security is not just about productivity; it is also about accessibility of food.
• Market Failure: It also had to solve the case of India being a market failure. It means that goods and services are available in the economy, but there is little demand.
• This is because majority of population lives on agriculture which does not provide them with good purchasing power. With this policy shift their incomes were supposed to be improved and market demand be boosted. This would also involve generating more rural employment.
Incorrect
• . Statement 1: Agriculture is a key feed to other industries, for e.g. food processing sector. An increase in agricultural growth directly translates to a growth in other sectors of the economy.
• Statement 2: The movement was intended not to cut down competition in any particular sector of the economy rather to facilitate growth in all the sectors.
• Statement 3: Investment in agriculture also involves creation of capital goods such as warehousing, irrigation infrastructure which both directly and indirectly generates employment.
• The other major challenges to be solved were:
• Food Security, which in a sense means ensuring adequate infrastructure in rural areas in agriculture. It is because food security is not just about productivity; it is also about accessibility of food.
• Market Failure: It also had to solve the case of India being a market failure. It means that goods and services are available in the economy, but there is little demand.
• This is because majority of population lives on agriculture which does not provide them with good purchasing power. With this policy shift their incomes were supposed to be improved and market demand be boosted. This would also involve generating more rural employment.
Question 9 of 10
9. Question
2 points
Which of the following are benefits/potential benefits of Goods and Service Tax (GST)?
1. It will result into higher economic growth as GDP is expected to rise by about 2%.
2. It has expanded the tax base and introduced higher transparency in the taxation system.
3. It has facilitated the freedom of movement of goods and services and created a common
market in the country.
Which of the statements given above are correct?
Correct
• Goods and Service Tax (GST) is the single comprehensive indirect tax, operational from 1 July
• 2017, on supply of goods and services, right from the manufacturer/ service provider to the
• consumer. It is a destination-based consumption tax with facility of Input Tax Credit in the
• supply chain. It is applicable throughout the country with one rate for one type of
• goods/service. It has amalgamated a large number of Central and State taxes and cesses. It
• has replaced large number of taxes on goods and services levied on production/sale of goods
• or provision of service.
• GST has simplified the multiplicity of taxes on goods and services.
• The laws, procedures and rates of taxes across the country are standardized. It
• has facilitated the freedom of movement of goods and services and created a
• common market in the country.
• It is aimed at reducing the cost of business operations and cascading effect of
• various taxes on consumers. It has also reduced the overall cost of production,
• which will make Indian products/services more competitive in the domestic and
• international markets.
• It will also result into higher economic growth as GDP is expected to rise by
• about 2%.
• Compliance will also be easier as all tax payment related services like
• registration, returns, payments are available online through a common portal
• http://www.gst.gov.in.
• It has expanded the tax base, introduced higher transparency in the taxation
• system, reduced human interface between Taxpayer and Government and is
• furthering ease of doing business.
• All the above statements are correct.
Incorrect
• Goods and Service Tax (GST) is the single comprehensive indirect tax, operational from 1 July
• 2017, on supply of goods and services, right from the manufacturer/ service provider to the
• consumer. It is a destination-based consumption tax with facility of Input Tax Credit in the
• supply chain. It is applicable throughout the country with one rate for one type of
• goods/service. It has amalgamated a large number of Central and State taxes and cesses. It
• has replaced large number of taxes on goods and services levied on production/sale of goods
• or provision of service.
• GST has simplified the multiplicity of taxes on goods and services.
• The laws, procedures and rates of taxes across the country are standardized. It
• has facilitated the freedom of movement of goods and services and created a
• common market in the country.
• It is aimed at reducing the cost of business operations and cascading effect of
• various taxes on consumers. It has also reduced the overall cost of production,
• which will make Indian products/services more competitive in the domestic and
• international markets.
• It will also result into higher economic growth as GDP is expected to rise by
• about 2%.
• Compliance will also be easier as all tax payment related services like
• registration, returns, payments are available online through a common portal
• http://www.gst.gov.in.
• It has expanded the tax base, introduced higher transparency in the taxation
• system, reduced human interface between Taxpayer and Government and is
• furthering ease of doing business.
• All the above statements are correct.
Question 10 of 10
10. Question
2 points
Consider the following statements regarding Gross Domestic product (GDP)
1. If the GDP of the country is rising, the welfare will rise as a consequence.
2. Many activities in an economy are not evaluated in monetary terms and hence, they are not
included in calculating GDP.
Which of the statements given above is/are correct?
Correct
• GDP is the sum total of value of goods and services created within the geographical boundary
• of a country in a particular year. It gets distributed among the people as incomes (except for
• retained earnings). So we may be tempted to treat higher level of GDP of a country as an index
• of greater well-being of the people of that country (to account for price changes, we may take
• the value of real GDP instead of nominal GDP).
But there are at least three reasons why this may not be correct.
1. Distribution of GDP – how uniform is it: If the GDP of the country is rising, the welfare may not rise as a consequence. Hence, statement 1 is incorrect. This is because the rise in GDP may be concentrated in the hands of very few individuals or firms. For the rest, the income may in fact have fallen. In such a case the welfare of the entire country cannot be said to have increased.
2. Non-monetary exchanges: Many activities in an economy are not evaluated in monetary terms. For example, the domestic services women perform at home are not paid for. The exchanges which take place in the informal sector without the help of money are called barter exchanges. In barter exchanges, goods (or services) are directly exchanged against each other. But since money is not being used here, these exchanges are not registered as part of economic activity.
3. Externalities: Externalities refer to the benefits (or harms) a firm or an individual causes to another for which they are not paid (or penalised). Externalities do not have any market in which they can be bought and sold.
Incorrect
• GDP is the sum total of value of goods and services created within the geographical boundary
• of a country in a particular year. It gets distributed among the people as incomes (except for
• retained earnings). So we may be tempted to treat higher level of GDP of a country as an index
• of greater well-being of the people of that country (to account for price changes, we may take
• the value of real GDP instead of nominal GDP).
But there are at least three reasons why this may not be correct.
1. Distribution of GDP – how uniform is it: If the GDP of the country is rising, the welfare may not rise as a consequence. Hence, statement 1 is incorrect. This is because the rise in GDP may be concentrated in the hands of very few individuals or firms. For the rest, the income may in fact have fallen. In such a case the welfare of the entire country cannot be said to have increased.
2. Non-monetary exchanges: Many activities in an economy are not evaluated in monetary terms. For example, the domestic services women perform at home are not paid for. The exchanges which take place in the informal sector without the help of money are called barter exchanges. In barter exchanges, goods (or services) are directly exchanged against each other. But since money is not being used here, these exchanges are not registered as part of economic activity.
3. Externalities: Externalities refer to the benefits (or harms) a firm or an individual causes to another for which they are not paid (or penalised). Externalities do not have any market in which they can be bought and sold.
